BILL ANALYSIS �
AB 1804
Page 1
ASSEMBLY THIRD READING
AB 1804 (Perea)
As Amended May 15, 2014
Majority vote
INSURANCE 9-2
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|Ayes:|Perea, Bradford, Ian | | |
| |Calderon, Cooley, | | |
| |Dababneh, Frazier, | | |
| |Gonzalez, V. Manuel | | |
| |P�rez, Wieckowski | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Allen, Beth Gaines | | |
| | | | |
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SUMMARY : Provides that policyholders of most individual
insurance policies are entitled to designate a third-party who
will be sent a notice if the policy is about to lapse for
nonpayment of premium. Specifically, this bill :
1)Provides that an insurer must, within 30 days after the
inception date of an insurance policy covered by the bill,
notify the policyholder of the right to designate one
third-party to receive notices that the policy may lapse,
unless the applicant has already been given notice of the
right to designate one person, in addition to the applicant,
to receive a notice of lapse, termination, expiration,
cancellation or nonrenewal of the policy for nonpayment of
premium.
2)Provides that an applicant has 30 days after the insurer sends
the notice to submit to the insurer the name, address and
phone number of the person designated by the applicant, or to
submit a signed form waiving the right.
3)Provides that the insurer may conclusively presume that the
policyholder has waived the right to designate a third party
if no response is received within 30 days after the notice was
sent.
4)Requires insurers to maintain records of the designee
information for the life of the policy, and allow the
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policyholder to update the information upon the policyholder's
request.
5)Provides that insurers shall notify the policyholder every two
years of the right to either update designee information, or
the right to make a designation, as the case may be.
6)Provides that no policy subject to the bill's requirements can
be cancelled for nonpayment of premium, unless the designated
third party has been notified at least 10 days prior to the
cancellation date.
7)Provides that the bill's requirements apply to:
a) Policies covering real property used for residential
purposes that consist of 4 units or less;
b) Personal liability policies and policies covering
liability from or damage to personal property; and
c) Disability and health insurance policies.
8)Specifies that a person designated to receive notices pursuant
to the bill does not acquire any substantive rights under the
policy.
9)Provides that the bill does not apply to policies that take
effect prior to July 1, 2015.
EXISTING LAW :
1)Establishes, with various time frames depending on the type of
insurance policy, that a policy cannot be cancelled for
nonpayment of premium unless the named insured is provided a
notice that the policy will be cancelled on a date certain.
2)Provides that an individual life insurance policy shall not be
issued or delivered in California unless the policyholder has
been afforded the right to designate at least one person in
addition to the policyholder to receive a notice that the
policy is going to lapse for nonpayment of premium.
3)Provides that no individual policy or certificate under a
group policy of Long-Term-Care (LTC) insurance shall be issued
in California unless the policyholder has been afforded the
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right to designate at least one person in addition to the
policyholder to receive a notice that the policy is going to
lapse for nonpayment of premium.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
1)Purpose. According to the sponsor, the California Department
of Insurance (DOI), the bill is an important consumer benefit
for people who have difficulty managing their insurance
responsibilities either due to health or residency issues.
DOI notes that policyholders of all ages can find themselves
in situations that might cause important insurance protections
to lapse due to a failure to pay the premium. In addition to
older policyholders who might want a relative or close family
friend to keep an eye on their insurance protections, others
who might have prolonged separations from their primary
residence, such as college students, members of the military,
or people who work for extended periods away from home will
find the bill's proposal a great benefit.
2)Opt in. The bill is a consumer opt in proposal. Insurers
would be required to make the policyholders aware of the right
to designate a third party, and the policyholders would have
the right to accept or waive the right.
3)Military personnel. United Services Automobile Association
(USAA), an insurer that covers active and retired military and
their families, believes that the bill has possible benefits
for the military personnel who are forced to leave their homes
with very short notice in order to be deployed for long
periods of time. The opportunity to plan ahead with an opt-in
provision provides the clarity needed when putting personal
business in order, and allows our military to have faith that
a policy that is critical to their family well-being is
responsibly handled.
4)Scope of bill. With respect to the life insurance and LTC
laws, it is clear to which policies the right to designate
attaches. Insurers opposed to the bill have argued that the
language describing the policies to which the bill applies is
not adequately precise. DOI has committed to working on
language that will clarify the scope of the bill better than
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the current language.
5)Health insurance. Insurers opposed to the bill have objected
to inclusion of health insurance policies because recent
legislation, and regulations adopted by the DOI and the
Department of managed Health Care have adequately addressed
the bill's purposes. DOI has agreed to evaluate this concern
in connection with providing greater clarity in defining the
scope of policies to which the bill applies.
6)Age threshold. Insurers opposed to the bill suggest that
other states limit similar lapse rules to senior citizens, and
seek that limitation in this bill. As noted above, the author
and sponsor believe that there are sound reasons why the
bill's benefits will be valuable to non-seniors, notably to
military personnel, students, and others who frequently work
away from their principal residence, among others.
Analysis Prepared by : Mark Rakich / INS. / (916) 319-2086
FN: 0003457